Canada is not experiencing labour shortages, nor are widespread ones likely to materialize, although shifts in the economy are creating a new normal for the jobs market, a study to be released Friday says.
Many employers are concerned about looming labour and skills shortages, particularly as baby boomers retire. But the long-term prospects for Canada’s labour supply and demand appear “balanced,” making ongoing shortages unlikely, says the analysis, published by the Montreal-based Institute for Research on Public Policy.
It comes amid heated debate about shortages and the degree to which they exist. Some industry groups, such as the construction and information technology sectors, are sounding the alarm about shortages in skilled labour, while some economists (including those at Toronto Dominion Bank last month) say slow wage growth and falling job vacancy rates reflect little evidence of widespread shortages.
“We definitely don’t have broad labour shortages right now, because we still have effectively more workers looking for work than there are positions,” said Cliff Halliwell, former director general of policy research at Human Resources and Skills Development Canada and author of the report.
“That doesn’t mean there aren’t places, say, in northern Alberta, where they’re facing difficulties hiring workers or in specific occupations,” he added.
But the notion that Canada is facing large labour shortages in coming years “is very misleading,” said Mr. Halliwell, an economist who has studied labour market trends for 36 years. This is partly because the Bank of Canada would step in and raise interest rates if the labour market became too tight, a move which would cool the economy.
Reports of labour shortages were a key reason for a dramatic expansion of Canada’s temporary foreign worker program. The rules for bringing in TFWs have recently been tightened amid concerns about the program’s impact on wages and employment. Preliminary numbers show the number of TWFs, at more than 125,000 in the first half of this year, is higher than last year’s level.
Demographics are altering the labour market. Annual labour force growth is set to slow in the coming decade as older workers retire. And while immigrants have long been seen as the chief source of new labour-market growth, more supply will actually come from a pool of young Canadians, Mr. Halliwell said.
The report comes as Employment Minister Jason Kenney will meet with provincial ministers on Friday to try to end a standoff with the provinces about the Canada Jobs Grant.
Some pre-recession projections that Canada will soon be short “millions” of workers have proven untrue amid slower-than-expected economic growth and the fact that many baby boomers have delayed retirement and kept working.
Slow growth could continue for some time. The Ontario government cut its real GDP growth forecast for both 2013 and 2014 on Thursday, amid sluggish U.S. growth and shaky business confidence. Growth in Canada’s most populous province has also lagged behind the provincial government’s forecast so far this year.
Rather than focusing on the need to boost labour supply, policy should focus on how to develop, match and fully use the skills of Canadians, both employed and employed, he said. Attention should go to those still suffering from the fallout of the recession, chiefly young Canadians and recent immigrants. And the country shouldn’t increase immigration or TFW levels until Canada returns to full employment, he said.
The concept of “full employment” also requires a rethink, CIBC World Markets said in a separate report Thursday. Demographic and public policy changes mean there’s now more room than in previous years for the jobless rate to fall without sparking inflation, it said.